Nvidia announced on Tuesday that it expects to incur a $5.5 billion (£4.2 billion) charge following new US export restrictions on artificial intelligence chips bound for China and Hong Kong. The stricter rules now require licensing for the sale of Nvidia’s H20 chip—its most advanced AI chip designed for the Chinese market.
The US Commerce Department introduced these tighter regulations to curb the potential use of high-end AI chips in Chinese supercomputers, citing national security concerns. The licensing requirements also extend to AMD’s MI308 chip.
Nvidia confirmed the multi-billion dollar charge is tied to inventory, purchase obligations, and reserves related to the H20 chip line. Though Nvidia noted the H20 isn’t its most powerful chip, it acknowledged the product’s memory bandwidth and connectivity make it suitable for supercomputing applications—prompting long-term export restrictions.
Following the announcement, Nvidia’s shares fell nearly 6% in after-hours trading, while AMD’s dropped by 7%.
Chinese tech giants like Tencent, Alibaba, and ByteDance had ramped up purchases of the H20 to support local AI innovation. However, a report by the Institute for Progress suggested that some Chinese firms may have already used the H20 chips in ways that violate earlier export restrictions.
Despite the financial blow, analysts believe Nvidia will weather the storm. Marc Einstein from Counterpoint Research remarked, “This is a setback, but Nvidia is strong enough to absorb it,” emphasizing the broader impact on the entire US semiconductor sector.
The export restrictions come as Nvidia plans a $500 billion investment in US-based AI server infrastructure over the next four years, aligning with efforts by Washington to boost domestic chip production.
Industry experts warn that this move may further accelerate the separation of US and Chinese tech ecosystems. Rui Ma, founder of Tech Buzz China, noted, “It no longer makes sense for Chinese firms to rely on US chips,” adding that domestic alternatives may soon rise amid oversupply in data center capacity.
As of now, it’s uncertain whether the US will issue any licenses for the affected AI chips.
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